We’re thinking about SoAs all wrong

Tahn Sharpe

By

June 22, 2018

The FPA’s head of policy believes advisers are looking at the Statement of Advice (SoA) the wrong way, and they need to rethink the way they approach them.

Speaking on a panel hosted by Advice Intelligence at the Hotel CBD on Thursday, Ben Marshan said one of the complaints he hears a lot from members is that no other profession has to do an SoA.

“That is 180 degrees the wrong way to think about it,” Marshan said.

Advisers are “lucky”, he continued, that when they engage with clients, they get to send them away with something that will help them understand their life.

“We are so privileged that we are – I’ll use the word ‘forced’ – to have to provide it,” he said. “We’re actually quite privileged, and quite lucky that we’ve got a regulatory environment that says we have to do it.”

Marshan contrasted advice to accounting, where documents comparable to the SoA are not required.

“How many of us understand what’s going on with our tax returns?” he asked.

Wrong mindset

Marshan explained that the reason advisers disliked SoAs was because they approached them with the wrong mindset.

“We’re looking at it the wrong way; we’re looking at it as a compliance document, as something that’s a pain and a hassle to get out.”

Part of the reason advisers don’t like SoAs, he explained, is because they know clients don’t value them.

“We’re using 100 pages that the client isn’t ultimately going to read,” he said.

The worst SoAs, Marshan said, are the ones with too much detail. The ones that “try to tick every box and make it perfect often put the client in a worse financial position”.

He noted that the advisers themselves shouldn’t shoulder all of the blame, and that the “compliance and legal functions that sit around advice” are being overly cautious with their SoA processes.

He also acknowledged that the compliance burden around advice is onerous, and that the regulation around advice is complicated.

“There are seven regulators that you need to satisfy just to produce an SoA,” he explained to Professional Planner. “The Australian Securities and Investments Commission, the Tax Practitioners Board, the Australian Prudential Regulation Authority, the Australian Taxation Office, the Australian Transaction Reports and Analysis Centre, the Office of the Australian Information Commissioner and the new Financial Adviser Standards and Ethics Authority.”

Despite this, Marshan believes advisers need to start making SoAs “easier to understand and more engaging”.

Get creative

Marshan said advisers need to consider new and even unorthodox ways to present SoAs in order to keep clients – and themselves – interested.

“It doesn’t have to be based on technology that was developed in 105 B.C.,” he said. “It doesn’t have to be paper, and it doesn’t have to have pages – it can be an email, a video or audio.”

Nowhere, Marshan stressed, does the regulator state that it wants advisers to provide paper-based documents.

“ASIC states in its regulatory guidance and examples around SoAs that it is technology neutral, technology agnostic,” he explained. “They don’t care what it looks like, how it sounds or how it’s produced as long as it meets the regulatory requirements.”

He said the much-debated ideal SoA length might one day be a moot point.

“The best SoA doesn’t involve any pages,” he said. “It’s got none. Zero.”


TOPICS:   Advice Intelligence,  Ben Marshan,  Financial Planning Association of Australia (FPA),  FPA,  statements of advice

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